Scaling collections: 6 lessons from the recent FCA fines

Pro tips

Outline the positive customer outcomes you expect the product to deliver and put the metrics in place to monitor and course correct if they aren't being hit

Design your collections experience and journeys with equal priority to acquisition journeys, as if things go wrong, the design of product in C&R is critical to mitigating poor or worse customer outcomes

2. Put the right systems and controls in place

It's important to have suitable systems and controls in place to enable good outcomes and a lack of these exposes customers to the risk of harm, such as unaffordable arrangements, charging inappropriate fees and more serious enforcement action.

Pro tips

Test customer journeys within your collections system against all relevant regulatory requirements

Put exception controls and data in place to identify breaches

Configure collections systems so that agents cannot make decisions outside of company policies or remit

3. Establish appropriate governance and oversight

It's one thing to have good policies and documented procedures, but unless there is regular testing of compliance with these, then the door is wide open to regulatory and company policy breaches.

Pro tips

Operate a 'three lines of defence' model, a framework for managing and mitigating risk (first line is operational management, second is risk management, and third is internal audit)

Put a comprehensive quality assurance process in place that tests agent calls and other interactions such as emails, for compliance with regulation and policy

Complement the above 'point in time' check with regular customer journey testing that considers the whole journey up to the point that they needed assistance with their debt

4. Set relevant agent KPIs and offer training

There's a saying that 'you get what you measure'; in the old days, if you measured cash collected, you would get more cash, but this caused customer detriment ("forcing" customers to prioritise payment of their debt over priority debts, encouraging customers to borrow money and so on). To remain compliant, any agent level incentives must be joined to Board level KPIs and OKRs that link to Consumer Duty requirements.

Meeting these requirements and having to navigate the very complex environment in which they operate can be a daunting prospect for agents. Training is essential so that they feel confident in holding difficult conversations that include vulnerability, hardship, income and expenditure, as well as understanding which of the myriad of forbearance options are in the customer's best interests.

Pro tips

Link agent level KPIs to good outcomes for customers (for example, don't use volumes of arrangements as a measure, but instead arrangement kept rates which is a truer measure of achieving an affordable arrangement)

Customise agent training to your products, policies, forbearance options and vulnerability policies and procedures

5. Be proactive in identifying and supporting vulnerable customers

Vulnerable customers have been high on the agenda of the FCA for several years, and expectations continue to grow in terms of how firms operate in this area.

Pro tips

Utilise system flags to highlight vulnerable customers and use this to ensure disproportionate action is not taken or is subject to experienced review before escalated action

Provide comprehensive agent training, including standard vulnerability frameworks (BRUCE, TEXAS etc)

For more serious vulnerabilities, employ specialists (or even a vulnerability team) with advanced training that frontline agents can hand off to so that the customers in this category can be case managed rather than subject to automated strategies and workflows

Put comprehensive MI in place for vulnerability that demonstrates that the firm is being proactive in its support for vulnerable customers

Have a separate set of forbearance options, depending on the customer vulnerability and circumstances

Be cognisant of data protection requirements regarding the recording of vulnerable customer data and make sure consent is obtained

6. Be aware of upcoming regulation PS24/2

The FCA has introduced new rules to bolster protections for struggling borrowers. Effective 4 November 2024, mortgage and consumer credit firms will need to provide increased support to customers facing, or at risk of, financial hardship.

Pro tips

Review your agreements, policies, and procedures to ensure compliance with these stricter forbearance rules, including:

• Vulnerable customer protection: implementing stricter controls to prioritise the needs of vulnerable customers
• Customer engagement: enhancing customer engagement through various channels to provide timely support
• Forbearance: offering flexible forbearance options tailored to individual needs, ensuring transparency and appropriateness
• Debt relief measures: providing interest and charge concessions to prevent debt escalation during forbearance periods
• Informed decision-making: empowering customers with clear and accurate information to make informed decisions about forbearance options presented to them
• Proactive financial health: for current account customers, utilising data models to identify customers at risk of financial difficulties and offer proactive support
• Policy and procedure oversight: monitoring the effectiveness and compliance of policies and procedures to maintain high standards and to ensure good customer outcomes
• How can we help you?
• We are experts in collections and recoveries and are practitioners with decades of experience. We work with our clients domestically and internationally to ensure that all aspects of their collections landscape are operating optimally.
• We're currently offering a free one-day targeted review workshop that looks at your entire collections operation, followed by a report of our findings and recommendations. This will help you to understand how you compare to your peers and where you may want to make improvements.